Analyzing Natural Gas ETFs’ Performance Last Week



Natural gas ETFs

Between April 20 and April 27, the ETFs that follow natural gas futures recorded the following performance:

  • The United States Natural Gas ETF (UNG) rose 0.2%.
  • The ProShares Ultra Bloomberg Natural Gas ETF (BOIL) was unchanged.

Between April 20 and April 27, natural gas June futures rose 0.1%. In Part 1, we discussed the factors that were behind natural gas’s moves in this period. UNG holds active natural gas futures contracts. BOIL tracks twice the daily changes of the Bloomberg Natural Gas Subindex on a daily basis.

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Long-term ETFs’ returns

From March 3, 2016, to April 27, 2018, natural gas active futures rose 69.1% from their 17-year low. In this period, natural gas–following ETFs UNG and BOIL fell 2.4% and 38.6%, respectively.

Since March 3, 2016, UNG and BOIL’s returns have been in the negative zone—compared to over a 60% gain in natural gas active futures. The negative “roll-yield” might be behind the lower returns. A negative roll-yield is caused when expiring futures contracts’ prices are lower than the following month’s futures contracts’ prices. BOIL’s actual and expected returns could also be different because of the compounding effect of price changes on a daily basis.

On April 27, the closing prices of natural gas futures contracts for delivery between June and August 2018 settled in an ascending order. The price pattern might hamper UNG and BOIL’s returns compared to natural gas’s returns.


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